Analyst Marci Ryvicker of Wells Fargo upgraded her opinion of Walt Disney Co. stock while downgrading Viacom.
In a research note Tuesday, Ryvicker noted that Disney has announced plans to push into direct-to-consumer streaming at a time when over-the-top is becoming an increasingly important part of the media ecosystem.
She urged investors to increase their holding in media companies that seem to have “solid streaming strategies,” such as Disney, CBS and 21st Century Fox.
Ryvicker noted that Disney stock has been down because of revenue issues at its TV properties and earnings dilution because of its planned acquisition of BAMTech.
“Should the company's streaming strategy succeed, we don't see why the stock wouldn't return to at least a market multiple,” she said, setting a target price of $116 for Disney stock, up from $109.
Meanwhile, Ryvicker noted that even though MTV’s ratings have improved, that doesn’t seem to be a catalyst for improving Viacom’s distribution and advertising revenue.
“With no visibility into the non-sports streaming bundles, the Charter carriage renewal, Paramount's slate financing, or long-term affiliate fee growth, it's tough to support the stock even at these levels, thus, our downgrade to Market Perform,” she said.
